TLDR
- The Magnificent Seven stocks lost nearly $800 billion in market value on Thursday
- Alphabet and Tesla’s heavy AI spending spooked investors, triggering a broad sell-off
- Trump’s new Section 301 tariffs of 10–12.5% hit 60 trading partners, including the UK, China, and Japan
- Oil prices surged past $100 a barrel, raising inflation fears ahead of next week’s Fed meeting
- Nasdaq and S&P 500 futures attempted to stabilize Friday after sharp Thursday losses
Wall Street closed sharply lower on Thursday after Alphabet and Tesla reported high AI spending with uncertain returns. The sell-off wiped nearly $800 billion from the Magnificent Seven group of megacap tech stocks.
Tesla fell close to 15%. Alphabet dropped more than 7%. Both stocks steadied somewhat in after-hours trading.
The Nasdaq Composite fell more than 2% on the day. The S&P 500 dropped 1.2% and the Dow Jones fell around 1%.
AI Spending Concerns Drive the Sell-Off
Investors reacted badly to both companies flagging rising costs tied to building out artificial intelligence infrastructure. The concern is simple: the spending is large, and the returns are not yet clear.
The losses spread overnight to Asian markets. South Korea’s KOSPI and Japan’s Nikkei both fell, with tech stocks leading the declines in both countries.
By Friday morning, futures were trying to recover. Dow futures were up around 0.4%, S&P 500 futures edged 0.2% higher, and Nasdaq futures hovered near flat.
Despite the slight uptick, all three major indexes were still on track for weekly losses.
Trump’s Tariffs Add to Market Pressure
Overnight, a new round of US tariffs took effect. The Trump administration imposed rates of 10% to 12.5% on 60 trading partners under Section 301 of the Trade Act of 1974.
Countries affected include the UK, China, Japan, and India. The White House said the tariffs were linked to forced labor concerns.
The move comes just days after the US imposed 50% tariffs on several Canadian products. It also comes after the Supreme Court struck down most of Trump’s earlier tariff attempts earlier this year.
Some energy products were exempted from the new tariffs.
Oil prices climbed above $100 a barrel this week, though Brent crude fell back 2% on Friday to just below $99. The rise was partly linked to Houthi attacks on Saudi tankers in the Red Sea, which raised fears of a wider conflict disrupting oil supply.
Higher oil prices raise the risk of energy-driven inflation, which could push the Federal Reserve toward a more aggressive stance on interest rates. The Fed meets next week and is widely expected to hold rates steady.
On the earnings front, American Express, NextEra Energy, and Verizon are reporting Friday. Next week, Microsoft and Meta report Wednesday, with Apple and Amazon due Thursday.
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